The largest airplane maker in the world, Boeing (BA, Financial), is under immense pressure as one of its esteemed clients has recently decided to swap the deal for 50 wide-bodied jets from the U.S. manufacturer to the European airplane maker, Airbus (EADSY, Financial), which has been trying to grab orders for the A350 aircraft during the year. The news that flew in this Thursday send a positive wave in the market with regard to the Airbus stock. This also refers to the failure of Boeing to impress the clients with the 787 Dreamliner which has cost it billions of money but has not even earned profits to the level of breakeven. Let’s find out the details of the deal struck with Airbus and assess how the European aircraft manufacturer stands to gain from this recent order.
The recently struck deal
American airlines, Delta (DAL, Financial) is replacing its old Boeing planes with 50 Airbus wide-bodied jets powered by Rolls Royce engines and the order stands worth $14 billion at listed prices. This earmarks the victory of Airbus’ wide bodied aircrafts over Boeing’s Dreamliner 787.
The order comprises 25 each of Airbus A350-900 and advanced Airbus A330-900neo aircraft, replacing the airline’s current fleet of Boeing 747-400 and 767-300ER jets. It has been decided that the Trent engine would be provided by Rolls Royce and also long term servicing of worth $5 billion would be provided by the engine maker.
In fact, news sources have confirmed that Airbus won this vital order after it promised to deliver its latest A330 neo in 2019, ahead of Boeing’s 787 Dreamliner’s’ schedule.
John Leahy, Airbus’ CEO said – “When the most successful U.S. airline today ... says 'yes we want 50 more of your wide body planes', you can't debate the fact that it is a massive endorsement of your product line".
Boeing taking the backseat
The Dreamliner has been beset with problems suffering from several delays in production before it was primarily introduced in 2011, and then being grounded due to battery fires last year. However, the management had stated that by October this year there were already 1000 orders in their kitty for the Dreamliner from around 60 global customers.
However, this sudden decision that came in from Delta was significant for Airbus, but has put the Dreamliner at the back stage as Delta has been one of the pioneer customers for Boeing aircrafts, till date.
According to Reuters, when Delta announced that it was about to buy a new fleet of long-range fuel efficient wide-body jets, it had said that the airline would require delivery in 2017 or 2018. Since Dreamliners are selling like hot pan cakes this year for Boeing, its production slots are likely to be filled up for the next few years. This means Delta airlines might not have received the delivery by its required timeline, so Airbus emerged as the next obvious choice after it gave clarity that its revamped A330neo would be delivered earlier than Boeing’s temporarily sold-out 787 Dreamliner.
Nevertheless, losing the monster order of Delta marks a huge failure of Boeing to stick to the timeline, while it represents the huge victory for the Europeans.
To conclude
Airbus’ success in winning this order showcases the professional attitude of the plane maker to sell long-range passenger aircraft with delivery within stipulated timelines, which has influenced Delta’s final decision. While the European player continues its battle against the U.S. counterpart, time will also suggest whether Airbus will be able to surpass Boeing in the wide-bodied jet category in terms of yearly order count where it is still lagging behind. For Boeing it’s a big loss, though the U.S. counterpart has more customers to deal with besides Delta. The U.S. plane maker will need to emphasize on maintaining and adjusting its delivery timelines to win more orders in the forthcoming quarters. But for now, Airbus is all set to celebrate its victory over the major and sole rival, Boeing.
